[Gerben42]

Quote

Again, it is not the "poorest of the poor" who have the major problem - it is the 45 year old who used to work for $18 and hour plus benefits at the GM plant in Oklahoma City, which was shut down, and now the only work he can get is the $8 an hour no benefit job at the Convergys call center.

That's globalization. The only way for us more expensive western countries to create jobs for ourselves is to be more efficient. It's not possible to pay someone $18 an hour when he is worth only $8 an hour for his employer. He might have been worth $18 in the past, but now we have the same goods from abroad for $8.

The solution is: education. That's where we are way ahead of the rest of the world. Educated people create more wealth for their employers. Anyone can put a mobile phone together, the Finnish employee (very expensive), the American employee (medium expensive) or the Romanian employee (not so expensive). That's why Nokia moved their assembly line to Romania, some others moved them who knows where.

Another possibility would be to lower the wages in the Western Countries, but cutting wages by half doesn't lower cost of living by a factor of 2 so that will just make the low-wage employees worse off.

[Codo]

When I studied economics, nearly 20 years ago, we had the so called "middle class community" here in Germany. We had quite high taxes for the rich and a very big social net for the poor, so that 85 % of all Germans had been part of the middle class. This changed during the last twenty years.

To have this high social standard the very rich had to pay many taxes. So they tried to have their money somewhere else to save taxes. Many had been really successful, so a lot of money disappeared from our economy. So, as we still wanted to pay for the the social net, we had to increase the taxes for things which cannot leave our economy. We had to increase the taxes for work and consum.

But this did not work either. If the work of people gets too expensive, companies use robots and machines. So these taxes increased the number of unemployed and again the governement received too few taxes to pay for the social net.

So, the governement tried another way. Very few taxes for work and really lower taxes for the very rich (to get their money back from Liechtenstein, Monaco etc. into our economy).

So most blue collar workers don't pay any loan taxes anymore. But unluckily in the same time the costs for all insurances (Health, unemployment, retirement) exploded, so that they do not have any more money in their pocket (axctually they have less).

OTOH if you earn really much money, your taxation had been much less then 20 years ago. (Maybe still high compared to other countries, but just 45 % is a low percentage compared to our newer history).

So one reason why the difference between low and high income is so big is, that the beneift the state gave to the richer weights higher then the one benefit for the poorer.

Another point is, that the income of the upper range in the management exploded in the last years while the income of the senior citizens and the blue collar workers was reduced. Their are reasons for this too, but to put it in a simple way: They guys who rule about the income will rule that the income of them and their fellows will increase and that the income of the rest should decrease.
There is no sense (Besides ethic maybe) in paying your employees just one cent more then you must. You (and I) may disagree with this POV, but this is reality.

Does this lead to a revolution? I doubt it, because the living standard is still really high here. Is there any solution? Try to stay on the right side of the fence. Study and know the right guys. Or find your luck in other areqas- like bridge fora or searching mushrooms in the wood.

[mike777]

lets back up\
1) voters say ok
2) result=higher unemployment
3) =lower growth rates
4) higher safety net

this is econ.....100

[Gerben42]

Quote

Does this lead to a revolution? I doubt it, because the living standard is still really high here. Is there any solution? Try to stay on the right side of the fence. Study and know the right guys. Or find your luck in other areqas- like bridge fora or searching mushrooms in the wood.

Unfortunately many children from less educated parents (disclaimer: I don't want to devalue them, not everyone will be happy from studying, many want more hands-on jobs) don't have the opportunity to go to college or university.

In Germany everyone can go to college. I really mean everyone. BUT... In many social circles this is not desirable: Parents want their children to get a job or learn a specific trade, they don't understand "university" because they don't have experience with it.

One of my fellow students came from a family where no one went to college. Not that they weren't very successful, they were. His father had his own company with greenhouses (yes Roland, also with tomatoes). But he expected his son to learn something useful, not go to university. But this is what the kid wanted and so he studied Astronomy and is now successful in his own way. But this caused a lot of stress in his family...

[Codo]

Gerben42, on May 16 2008, 06:30 PM, said:

His father had his own company with greenhouses (yes Roland, also with tomatoes). But he expected his son to learn something useful, not go to university.

Tomatoes from Holland?

No wonder he was successful. Selling red water for real money must earn him a fortune. At least much more then an astronomer or astrophysicist:)

But I agree with rest of your comment. After all, here where I live, there are many successfull farmers who sell tomatoes etc. from greenhouses. And they don't rate univeristy to be the right place for their kids. Well I hope they are right, but I doubt it.

[kenberg]

About views on going to college:

When I was growing up some friend of my parents knew someone whose kid was going to college and studying calculus. This subject, they understood, would allow a person to calculate the volume of a beer barrel with curved sides. Everyone was very impressed.

My father was not exactly opposed to me going to college, he just could not understand why a reasonably normal guy with reasonable ability to handle tools would want to do such a thing. When he first visited me after I joined a faculty, a secretary asked him if he was in academic life also. No, he explained, he had to work for a living. Many a truth is spoken in jest.

Nonetheless, I was raised in such a way that from early on, meaning age 10 or so, I understood that (a) when I grew up I was supposed to support myself and (B) how I chose to do that was my business.


I don't really know what the solution is to economic inequality but here is a short story. Freshman year I walked to high school with Fred, a friend from several years back. I took algebra in the college prep track, he took shop math in the vocational track. I became a mathematician, Fred became a plumber. If Fred and I were kids today, I'm sure some idiot social planner would insist that Fred take algebra which he wouldn't understand so that he could go to college which he wouldn't do. Make what you will out of this.

[hotShot]

Winstonm, on Mar 31 2007, 10:54 PM, said:

What is the cause? Is there a cure?

The cause:

Globalisation

The population of first world countries will divide into 2 groups:

1) Those who's payment is in global competition or provide service for them.
There are counties in the world where 500$ is considered a good monthly payment for an employee, so a global company will restructure and move the work to the cheapest county. This is nothing new, it affected jobs without a need for much professional training decades ago. The new thing is, that now jobs with high professional education are also involved. Now were talking about jobs like software development, research or development. In first world country's this lead to massive drop of income.

2) Those who's income depends on capital growth/intellectual property rights or provide service for them.

Those not in 1) or 2) now, will join one of them sooner( 1) ) or later ( 2) ).

There is no cure.

[DrTodd13]

I might phrase it a bit differently. It is a continuum but for the sake of discussion we can divide it into two groups. In the first group are jobs that nearly everyone is capable of doing given little or no training. This group accounts for probably around at least 90% of all jobs. The second group of jobs are ones in which most people are simply not capable of doing them regardless of how much training they received and even those that might be capable may ultimately not realize that capability due to lack of education or other resources. The second group is further fragmented because someone smart enough to be a doctor could probably also have been an attorney but not without significant additional training.

Both groups will be competing globally. In the first group, supply of this labor tends to outstrip demand and the pool is so large that competition is fierce. Advances in robotics gradually makes more and more of these jobs cheaper to do with machinery thus further increasing pressure for the remaining jobs and driving down the price of labor. Sure, you create some jobs in robotic design, manufacturing, repair, etc. but many if not most of those jobs will go to people in the second group. In the second group, demand tends to outstrip supply so labor costs in this group are driven up. I expect the have/have-not divide to increase but ultimately human jealousy will render the direction we are going unstable. Perceived lack of fairness in the innate capability toss-o-the-dice will result in calls for massive taxation on the haves. Governments will be walking a fine line of taxing the wealthy sufficiently to appease to masses while not taxing them so much that they refuse to produce.

[mikeh]

DrTodd13, on May 16 2008, 04:29 PM, said:

I might phrase it a bit differently. It is a continuum but for the sake of discussion we can divide it into two groups.

There are, of course, only two groups of people in the world: those who divide people into two groups and everyone else.

[jtfanclub]

DrTodd13, on May 16 2008, 04:29 PM, said:

I might phrase it a bit differently. It is a continuum but for the sake of discussion we can divide it into two groups. In the first group are jobs that nearly everyone is capable of doing given little or no training. This group accounts for probably around at least 90% of all jobs.

I am curious to know what these 90% of jobs are. I'd never make it as a waiter. I'd be a horrible line cook.

I will go so far as to say that virtualy all jobs take real ability and skill to do well. I think it's obvious to all concerned whether a restaurant has good waiters or bad ones. Could I pick a head of lettuce? Sure. Can I do it as fast as a professional? Hell no. I'd probably bruise them pretty badly to boot. Might give a few hundred people salmonella. And God knows how many people I'd kill if I tried fixing cars without any formal training.

I think that it's interesting that you pick doctor and lawyer as two fields that require lots of training. They're actually two of the few jobs that can be done with very little training, if any. Lots of people represent themselves in court, and do so successfully. There are towns where everything from birthing babies to setting broken legs is handled by somebody with no training at all, except of the 'on-the-job' variety.

Could the job be handled better if you spend 8 years studying law and medicine? Sure. Could the guy who changes the oil in my car do a better job if he spent 8 years studying automotive and fluid mechanics? Could the line cook do a better job if he spent 8 years in culinary school? Sure, but so what? The only real difference between these careers in terms of 'capability' is how many years of training we require of them before we give them their little piece of paper.

[DrTodd13]

Those are some crazy statements. Nobody shows up in court with zero preparation or training and tries to win a case and if they try it then they'll lose miserably. Take the average person and they would fail at the real training it takes to be a doctor or a lawyer. Sure, everybody gets better at any job with practice. You might hate being a waiter and some waiter might be a lot better at it than you but I bet you or anyone else could get a job being a waiter if you wanted to.

[kenberg]

About the lettuce picking. I think the answer is, no you couldn't. Yes you can pick one head of lettuce, but no you cannot pick lettuce efficiently enough to make a living at it. Or at least I couldn't. It wasn't lettuce but I did try picking beans once. I was paid by the bean (well, by the pound really) and I would starve to death if I had to earn my living that way.

[PassedOut]

kenberg, on May 16 2008, 06:59 PM, said:

I did try picking beans once. I was paid by the bean (well, by the pound really) and I would starve to death if I had to earn my living that way.

I had the same experience growing up. But I couldn't believe how much the good pickers brought to the scales!

[Al_U_Card]

kenberg, on May 16 2008, 12:36 PM, said:

About views on going to college:

When I was growing up some friend of my parents knew someone whose kid was going to college and studying calculus. This subject, they understood, would allow a person to calculate the volume of a beer barrel with curved sides. Everyone was very impressed.

My father was not exactly opposed to me going to college, he just could not understand why a reasonably normal guy with reasonable ability to handle tools would want to do such a thing. When he first visited me after I joined a faculty, a secretary asked him if he was in academic life also. No, he explained, he had to work for a living. Many a truth is spoken in jest.

Nonetheless, I was raised in such a way that from early on, meaning age 10 or so, I understood that (a) when I grew up I was supposed to support myself and ( how I chose to do that was my business.


I don't really know what the solution is to economic inequality but here is a short story. Freshman year I walked to high school with Fred, a friend from several years back. I took algebra in the college prep track, he took shop math in the vocational track. I became a mathematician, Fred became a plumber. If Fred and I were kids today, I'm sure some idiot social planner would insist that Fred take algebra which he wouldn't understand so that he could go to college which he wouldn't do. Make what you will out of this.

I like it Ken. btw Education should be universal and free, as far as you want to take it BUT subsequent remunerated employment would come with an I.O.U. provision to repay the extent of what was received. Kids just out of school wouldn't miss, say, 25% of their pay for the first 5 years of work...incentives....and encouragement....and reasonableness...lead to innovation and productivity which are the hallmarks of a progressive and successful society.

[jtfanclub]

DrTodd13, on May 16 2008, 05:24 PM, said:

Those are some crazy statements.  Nobody shows up in court with zero preparation or training and tries to win a case and if they try it then they'll lose miserably.  Take the average person and they would fail at the real training it takes to be a doctor or a lawyer.  Sure, everybody gets better at any job with practice.  You might hate being a waiter and some waiter might be a lot better at it than you but I bet you or anyone else could get a job being a waiter if you wanted to.

Sure they do. Haven't you argued your way out of a ticket, for example? How many years of training did it require?

I think you underestimate how difficult a job it is to be a waiter at a busy restaurant. This is especially true if there is nobody more experienced around to rely on.

Could I get a job as a waiter? Sure. But that's simply because we accept mediocrity from our waiters when we don't accept mediocrity from our doctors. Insert your own lawyer joke here.

IMHO, this is a big problem with American society. We tend to look down on careers whose education doesn't come from a college. Even a generation ago, if you were a good farmer, auto mechanic, plumber, electrician, even a good ditch digger you were a well respected member of the community. You weren't considered inferior to a good lawyer, doctor, or engineer. Here's hoping we go back to the old days, and I'm a computer tech.

[kenberg]

PassedOut, on May 16 2008, 07:07 PM, said:

kenberg, on May 16 2008, 06:59 PM, said:

I did try picking beans once. I was paid by the bean (well, by the pound really) and I would starve to death if I had to earn my living that way.

I had the same experience growing up. But I couldn't believe how much the good pickers brought to the scales!

Exactly. It was embarrassing.

[blackshoe]

"You are charged with failure to change the address on your ATV registration. How do you plead?"
"Not guilty, your Honor."
"On what grounds?"
"I don't own an ATV. I never have."
"Case dismissed!"

No, I'm not a lawyer.

[Winstonm]

Quote

QUOTE 

Again, it is not the "poorest of the poor" who have the major problem - it is the 45 year old who used to work for $18 and hour plus benefits at the GM plant in Oklahoma City, which was shut down, and now the only work he can get is the $8 an hour no benefit job at the Convergys call center.




That's globalization. The only way for us more expensive western countries to create jobs for ourselves is to be more efficient. It's not possible to pay someone $18 an hour when he is worth only $8 an hour for his employer. He might have been worth $18 in the past, but now we have the same goods from abroad for $8.

There seems to be a divergence in understanding with many between "free trade" and "globalisation". Free trade does not impose tarrifs to protect inefficiency within borders, but at the same time it should not be utilized simply as a method of labor arbitrage to the advantage of profit margins - labor arbitrage is the result of globalisation, not free trade.

Free trade should be encouraged - globalisation, abandoned.

[kenberg]

Al_U_Card, on May 16 2008, 07:07 PM, said:

kenberg, on May 16 2008, 12:36 PM, said:

About views on going to college:

When I was growing up some friend of my parents knew someone whose kid was going to college and studying calculus. This subject, they understood, would allow a person to calculate the volume of a beer barrel with curved sides. Everyone was very impressed.

My father was not exactly opposed to me going to college, he just could not understand why a reasonably normal guy with reasonable ability to handle tools would want to do such a  thing. When he first visited me after I joined a faculty, a secretary asked him if he was in academic life also. No, he explained, he had to work for a living. Many a truth is spoken in jest.

Nonetheless, I was raised in such a way that from early on, meaning age 10 or so,  I understood that (a) when I grew up I was supposed to support myself and ( how I chose to do that was my business.


I don't really know what the solution is to economic inequality but here is a short story. Freshman year I walked to high school with Fred, a friend from several years back. I took algebra in the college prep track, he took shop math in the vocational track. I became a mathematician, Fred became a plumber. If Fred and I were kids today, I'm sure some idiot social planner would insist that Fred take algebra which he wouldn't understand so that he could go to college which he wouldn't do. Make what you will out of this.

I like it Ken. btw Education should be universal and free, as far as you want to take it BUT subsequent remunerated employment would come with an I.O.U. provision to repay the extent of what was received. Kids just out of school wouldn't miss, say, 25% of their pay for the first 5 years of work...incentives....and encouragement....and reasonableness...lead to innovation and productivity which are the hallmarks of a progressive and successful society.

Kids wouldn't miss 25% of their pay for the first five years?!?!. Speak for yourself, I sure as hell would have missed it.

Young people often end up with enormous debt when they finish school. I see it as tragic. If their situation is such that they must, then they must. But for young people here in Maryland, if they come from a family with limited resources, I would recommend two years at the Community College while living at home followed by two years at the University, hopefully getting some financial help for those with talent but limited resources and hopefully living frugally. When they get out they can live their lives free and clear, or close to it.

Priorities today seem bizarre to me. My wife also teaches and this semester had a student who often had trouble getting things done on time. He had a job that interfered with his studies. A tough situation. As spring break approached she suggested that he use the time to catch up on some material. No can do. He was taking a cruise to the Caribbean. When I was a student at Minnesota I might take a cruise in a canoe on the St. Croix. I guess it's one of those age things but I really don't get it.

Anyway, I agree with the earlier comment that the guy who really needs help is the forty something whose job has just disappeared. That's a true mess.

[hrothgar]

jtfanclub, on May 17 2008, 03:31 AM, said:

DrTodd13, on May 16 2008, 05:24 PM, said:

Those are some crazy statements.  Nobody shows up in court with zero preparation or training and tries to win a case and if they try it then they'll lose miserably.  Take the average person and they would fail at the real training it takes to be a doctor or a lawyer.  Sure, everybody gets better at any job with practice.  You might hate being a waiter and some waiter might be a lot better at it than you but I bet you or anyone else could get a job being a waiter if you wanted to.

Sure they do. Haven't you argued your way out of a ticket, for example? How many years of training did it require?

I think you underestimate how difficult a job it is to be a waiter at a busy restaurant. This is especially true if there is nobody more experienced around to rely on.

Could I get a job as a waiter? Sure. But that's simply because we accept mediocrity from our waiters when we don't accept mediocrity from our doctors. Insert your own lawyer joke here.

IMHO, this is a big problem with American society. We tend to look down on careers whose education doesn't come from a college. Even a generation ago, if you were a good farmer, auto mechanic, plumber, electrician, even a good ditch digger you were a well respected member of the community. You weren't considered inferior to a good lawyer, doctor, or engineer. Here's hoping we go back to the old days, and I'm a computer tech.

One of the basic examples that is included in any economics 101 is a discussion of supply and demand as it applies to individual wages.

For the moment, lets ignore a couple different broad classes of jobs

1. Let's pretend that there aren't any jobs that individuals find deeply distasteful for whatever reason. (asbestos removal, sewage treatment, what have you). In a similar fashion, lets pretend that there are no jobs out their that folks love. (Major league ball player etc)

2. Lets assume that labor markets are competitive. Organizations like the American Bar Association and the American Medical Association aren't able to artificially constrain the supply of doctors and lawyers.

(I don't claim that these two assumptions hold true in all cases. However, I think that its a close enough approximation)

Now, lets get started with a though experiment:

Why is it that we see such enormous wage differentials? Why is it that a major league ball player is able to command millions of dollars a year while a McDonalds employee makes minimum wage? Why doesn't the McDonalds employee go to the ball park and offer to play for half what A-Rod is making?

The simple answer is supply and demand. The major league ball player has unique skills and talents that the McDonalds employee doesn't possess. In contrast, their are lots of people that are able to work at a McDonalds. The job is designed so that virtually anyone can do so.

In a similar vein, their are lots of folks out there who are qualified to work as a waiter, pick beans, or answer phones in a call center. Does this mean that every lawyer would be able to work as a call center employee? Could every doctor do a great job picking grapes? Of course not. It does, however, mean that as long as there are lots and lots of folks capable of picking grapes this job is never going to command particularly high wages. Maybe you're not cut out to be a waiter, but there are lots of folks out there who are. I don't think that the same holds true for a large number of skilled jobs.

Please note: The only thing that I am talking about here are wages... What types of jobs command high salaries. I'm not talking about sociological factors related to "value". I will make the following claim: Highly paid jobs will (typically) require skills sets that are in limited supply.

In some cases these might require unique physical characteristics. In other cases, the jobs will require that folks invest significant time and effort improving their human capital. In a few cases, both are required. (Not every seven foot tall person will make it in the NBA. Mastering the necessary physical skills requires enormous effort. There is also the obvious benefit that there are a limited number of NBA franchises)

For what its worth, I don't see much difference between free trade and globalization. (I say this as an ardent free trader).

One issue that folks really might want to consider is the impact of technology on the requirement for skilled labor: Capital (heavy machinery) dramatically improves human productivity. However, it also tends to erode opportunities to exercise skilled labor. 50 years ago it was possible to build substantial human capital mastering skills like engine lathe operator. If you design a programmable engine lathe that opportunity goes by the way side.